A business insurance review may not be the most exciting part of running your business, but it is one of the most important. Here are four reasons your policies may be due for review.
As your business evolves, so do your insurance needs.
When was the last time you took a close look at your business insurance policies? If your business has grown or changed, don’t wait until your policy is up for renewal and you’re simply too busy for more than a quick glance. Instead, carefully review your policies as your business changes to help avoid over-paying for premiums or over-exposing your business to risks.
Ask the right questions to help minimize your costs and your risks.
If you answer YES to any one of the following questions, it’s time to take a fresh look at your business owner’s insurance policies.
1. Has the organizational structure of your business changed?
Your personal liability varies according to your business’s organizational structure, and so do your insurance needs.
If you’re a sole proprietorship, the most common business type in the US, you’re personally responsible for any debts or acts of negligence related to your business. Your liability insurance needs to reflect that risk. However, if you’ve re-organized as an LLC, LLP, C- or S-corporation, liability shifts to the partnership or corporation. Your insurance policies need to address that shift as well as any additional types of coverage (such as Directors and Officers Insurance) required for these organizations in your state.
For additional information on these business structures and their associated risks and benefits, take a look at this Business Guide from the Small Business Administration.
2. Have you added to or changed your product line or the types of service you offer?
Your insurance needs also depend upon the services or products you offer. If those offerings change, either in nature or scope, you’ll want to make sure you have the right type and levels of coverage to protect your business from any claims of negligence.
Both professional liability and product liability insurance policies can and should be customized to your unique business needs. If you’ve expanded into e-commerce, you may also consider adding data breach or cyber liability insurance to cover any legal liabilities, penalties or recovery costs.
3. Have you made improvements to your business property?
If you’ve remodeled your offices or purchased new equipment or furniture, you may need to revisit your property insurance coverage. If you run a home-based business, you should be aware that your homeowners’ policy won’t necessarily cover business-related equipment losses. Be sure to check whether you need a rider to your policy or additional insurance.
4. Have your revenues, staffing levels or inventory value changed significantly?
When your business grows, your coverage levels need to reflect that growth. Here are a few examples:
- If revenues grow, your business interruption insurance should keep pace to avoid a compensation shortfall
- If your staff grows, you’ll want to make sure you’re [still] meeting your state’s requirements for Workers’ Compensation Insurance coverage (see your state’s Workers’ Comp requirements in this National Federation of Independent Business guide)
- If your physical inventory grows, you’ll want to make sure your property insurance reflects its increased value – and risks
On the other hand, if any of these decline, you’ll also want to review your coverage. You could be saving on premiums – right when your business needs it most.
Don’t wait until your policies are due for renewal.
Change happens fast in business. If you wait until your policies are up for renewal, you could be overpaying your premiums for months or find yourself under-compensated if disaster strikes. Play it safe. Ask the right questions at the right time. Your insurance review might just save you money or even your business.